Downtown retail incentive program is winding down

An economic development program paid out $2.2 million to 11 downtown businesses over the past 10 years.

An economic development program paid out $2.2 million to 11 downtown businesses over the past 10 years.

Photo: Julie Soefer

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Midway plans to break ground on its 13-story building ﻿after it finds a tenant for two or three floors.

Midway plans to break ground on its 13-story building ﻿after it finds a tenant for two or three floors.

Photo: Courtesy Of Midway

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Phoenicia Specialty Foods' downtown Houston store was part of the incentive program.

Phoenicia Specialty Foods' downtown Houston store was part of the incentive program.

Photo: Doris Ting

Downtown retail incentive program is winding down

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An economic development program used for at least a decade to help lure retailers to downtown Houston will not be renewed next year.

The program, administered by the Houston Downtown Management District, provides grants to businesses and property owners for new stores. It has paid out $2.2 million to 11 downtown businesses over the past 10 years, the district's Angie Bertinot said. The grant covers fixed improvement costs, like interior build-out projects.

The Finger Cos., for example, received $500,000 it used for Phoenicia Specialty Foods, a grocer on the first floor of the developer's One Park Place residential tower just west of Discovery Green. The original developer of the mixed-use Houston Pavilions project - now called GreenStreet - received $600,000. Hearsay off Market Square received $75,000 to cover the cost of building out a kitchen.

"We feel like they've done what they needed to do, particularly in the historic district," Bertinot said, explaining how the area around Market Square Park is now a thriving neighborhood. In the past five years, 25 businesses have opened and two residential towers are under construction.

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There is $783,000 remaining in the fund, Bertinot said, and the district is deciding whether to continue providing grants until the funds are depleted or to put the money toward other capital projects, such as public safety, sidewalk improvements and beautification projects.

The catalytic grant used to be paid out upfront, but the district revised the structure to a three-year payout.

The district and its programs are funded by downtown property owners.

Why now on tower?

For years Houston's First Baptist Church has been hoping to partner with a developer that would build an office tower on its 4-acre parking lot. In return, church members would be able to use the building's parking garage on nights and weekends.

Hines tried it in 2012, but the company never broke ground. Last week, Midway announced it had now struck a deal with the church at 7401 Katy Freeway, near the Interstate 10/West Loop interchange.

Executive Shon Link, who wasn't available immediately after the announcement, later explained why the company is moving forward at a time when the office market is softening.

"There are plenty of tenants out there that need to make a move of some sort regardless of the energy climate. Either their lease is up or they need to expand or what have you," Link said. "But of course with oil prices the way they are, I'd say the idea we'd find a large energy-related tenant at the moment, the chances are probably less than they were than last year."

Midway's plan is to break ground on a 13-story building with 225,000 square feet once it finds a tenant that will commit to occupying two to three floors.

High visibility

Link touted the site's proximity to upscale neighborhoods and its visibility at the high-traffic intersection of I-10 and the West Loop.

He said two office buildings could be supported there, and Midway's plan calls for a second tower with 175,000 square feet.

"In the near term it could be a little challenging, but we're confident we can make something happen," Link said.

If Midway and the church enter into an official ground lease, the property tax exemption on the land will end, and the land and the building will be valued at market value, according to the Harris County Appraisal District.